Fusion Finance Limited, a leading Non-Banking Financial Company-Microfinance Institution (NBFC-MFI), has reported a significant increase in net loss and a substantial decline in revenue for the first quarter of the fiscal year 2026 (Q1 FY26). The company's financial results, released on August 8, 2025, reveal the challenges faced by the microfinance sector amid ongoing economic pressures.

Financial Performance

Fusion Finance reported a net loss of ₹922.50 million in Q1 FY26, a considerable increase from the ₹356.20 million loss recorded in the same quarter of the previous year. This widening of losses underscores the difficulties the company is encountering in the current economic environment.

The company's total income saw a sharp decline, falling to ₹4.46 billion in Q1 FY26 from ₹7.07 billion in Q1 FY25, representing a year-over-year decrease of 36.95%. Interest income, which forms the core of the company's revenue, dropped by 32.09% to ₹4.22 billion from ₹6.21 billion in the corresponding quarter last year.

Key Financial Metrics

Despite the challenges, Fusion Finance maintained stability in some areas and showed improvements in others:

• Net Interest Income (NII) remained stable at ₹2.68 billion in Q1 FY26, unchanged from Q4 FY25.
• Net Interest Margin (NIM) improved to 10.29% in Q1 FY26 from 8.57% in Q4 FY25.
• Cost of funds reduced to 10.27% in Q1 FY26 from 10.52% in Q4 FY25.
• Pre-Provision Operating Profit stood at ₹870 million, slightly down from ₹900 million in Q4 FY25.

Asset Quality and Capital Adequacy

The company reported a Gross Non-Performing Asset (GNPA) ratio of 5.43% in Q1 FY26, showing a marginal improvement from 5.46% in Q1 FY25. The Net NPA stood at 0.19%, indicating strong provisioning practices.

Fusion Finance maintained a healthy capital adequacy position with a Capital to Risk-weighted Assets Ratio (CRAR) of 29.52%, bolstered by recent equity infusion.

Business Highlights

As of June 2025, Fusion Finance reported:

• Assets Under Management (AUM) of ₹76.88 billion
• Total loan disbursements of ₹9.50 billion in Q1 FY26
• An active borrower base of approximately 2.85 million
• A network of 1,560 branches across 22 states and 3 Union Territories

Management Commentary

Devesh Sachdev, Managing Director of Fusion Finance Limited, commented on the results: "In Q1 FY26, we continued to make progress, moving closer to normalcy. Our strong measures and persistent efforts on the ground have helped us overcome the external and operational hurdles, setting us on a path to recovery."

Sanjay Garyali, Chief Executive Officer, added: "We continue to witness improvements in key business and financial parameters including collection efficiencies, credit costs and GNPA. As we step into the next phase, our focus remains on driving sustainable growth with strong credit checks, tech-led underwriting, and deeper customer engagement."

Future Outlook

Despite the current challenges, Fusion Finance remains optimistic about its future prospects. The company plans to focus on sustainable growth, particularly in emerging rural and MSME markets. It has launched new products like Ujala and Sugam loans to deepen customer relationships and is developing additional products for the MSME segment.

The company's robust liquidity position, with ₹7.24 billion in cash and cash equivalents, representing 9.76% of total assets, provides a buffer against short-term financial pressures.

As Fusion Finance navigates through these challenging times, it will be crucial for the company to manage its asset quality, control costs, and capitalize on growth opportunities in the microfinance sector to return to profitability.

Fusion Finance , a microfinance lender, has reported a net loss of Rs 165 crore for the fourth quarter of fiscal year 2025, marking its fourth consecutive quarterly loss. The company's financial struggles have deepened, with its annual net loss reaching Rs 1,225 crore for FY25.

Financial Performance

The company's latest quarterly results reveal a challenging financial situation:

• Q4 FY25 Net Loss: Rs 165.00 crore
• Annual Net Loss FY25: Rs 1,225.00 crore
• Gross NPA Ratio: 7.92% (as of March-end)

Covenant Breaches and Repayment Concerns

Fusion Finance has disclosed that it has breached financial covenants on borrowings amounting to Rs 4,763.00 crore, rendering these loans potentially repayable on demand. This development raises significant concerns about the company's financial stability and liquidity position.

To address this issue, the company has taken the following steps:

1. Obtained extensions for Rs 4,080.00 crore of the affected borrowings
2. Ongoing discussions for the remaining amount

Quarterly Financial Highlights

Examining the company's income statement for the quarter ending March 2025:

The significant decline in EBITDA and the shift from profit to loss compared to the previous year underscore the severity of the company's financial challenges.

Annual Performance Overview

For the fiscal year 2024 (the most recent full-year data available):

While the FY24 results showed growth, the recent quarterly losses indicate a sharp reversal in the company's financial health.

Outlook and Challenges

Fusion Finance faces significant hurdles in the coming months:

1. Addressing the breach of financial covenants
2. Improving asset quality, as indicated by the high Gross NPA ratio
3. Reversing the trend of consecutive quarterly losses
4. Strengthening its capital position to meet regulatory requirements and support growth

The company's ability to navigate these challenges will be crucial for its future stability and growth in the competitive microfinance sector.